It doesn’t matter who you are – everyone loves getting something for nothing. So what if I told you that as a credit card owner you’re more likely sitting on a raft of unused rewards points that could pay for your next flight, gym membership, luxury purchase or even the credit card bill itself?
The startling reality is that you could be among over a quarter of Aussies who, according to new research commissioned by American Express, could be getting better value from their credit card spend.
In fact, 27% of credit card holders with rewards and benefits say they haven’t claimed anything in the past two years – the main reason being a lack of understanding on what their points could be used for.
While Australians are generally aware of their ability to earn points on their loyalty program or credit card, where they fall short is in understanding the value of redemption. We call it balancing the “earn” and the “burn” – the burn being how you use the points you’ve been accumulating. In my opinion, the ideal position is to earn the most number of points per every dollar spent and use the least number of points to fly.
And it starts with some simple mathematics. Choose your credit card to pay for the things you’re already buying to maximise the number of points you earn. Just remember to pay off your balance in full at the end of the month.
I know it can be tough to navigate the complexities of credit card programs, or even get hold of the right card for you. This is made even more confusing because not all rewards programs and their points are created equal. There are cards that can take you further, and as I’ve championed with iFLYflat, all you need is a little know-how.
With this in mind, here are some of my top tips for getting the most out of your credit card rewards program. Follow this, and who knows, one day you might be travelling Emirates business class to Dubai, all on the coat tails of your rewards program. And I would know, because I’ve done it.
- Do your homework first. The American Express Rewards Rethink research found that almost half (42%) of respondents admit that they didn’t research the rewards on offer before choosing a credit card – a decision one-third (32%) regret. Research also showed that cardholders who understand their credit card offering thoroughly earn, on average, 66% more rewards points than those who don’t. That’s more than doubling your accrued points each year.
- Remember that not all cards are created equal. As we know, different cards can earn you different points. Picking the right card in the first instance can see you earning double or even triple the points on exactly the same spend. For example, with a spend of $40,000, this is equal to 68,500 Virgin Velocity points on a Premium American Express card. With the same spend on a premium MasterCard or Visa, this amounts to only 25,000 Velocity points.
- Use your card for everyday purchases, not just the obvious, big-ticket items. From grocery shopping to filling up your car with petrol, all these small purchases can add up in terms of points accrued throughout a year. You can earn more points by making other small changes, such as downloading a coffee app and linking it to your card or making your credit card your primary card for direct debits for things such as gym membership and utility bills. It all starts with looking at your habitual spending behaviour and understanding that every single point counts to getting you closer to your reward.
- Redeem your points for travel. Where you can get the most from your points is often in the air. Using them to fly, either as an upgrade request or as a full business class redemption, is for me the most valuable and exciting way to “cash in” your rewards. We all know that a business class flight is too expensive to buy for most people, but earning points as part of your everyday spend, and redeeming those points for travel, can be fun, spontaneous and even romantic (with the right person).
- Look at cards that have partnerships with different providers applicable to you. When choosing your primary credit card, consider where the points you earn are transferrable. For example, the new American Express Explorer credit card allows points to be accumulated and then at a later date transferred, as needed, to eight airline frequent flyer programs, including Virgin’s Velocity, Singapore Airlines and Emirates, so I have more choice for where and when I want go.
In June next year the Reserve Bank will introduce interchange fee caps in an attempt to reduce surcharging.
Interchange is what largely pays for rewards so I expect that we’re going to see some significant modifications to the rewards landscape in the next 12 months.
If you’re going to make a move when it comes to your credit card, now is the time.
Remember, you don’t have to be an expert to access some great rewards; you just need to do your homework to ensure you are maximising your spend.